Chapter4 Ibuka's First Visit to the United States

Ibuka's First Visit to the United States

Masaru Ibuka before leaving
Japan on his first trip to
the United States.

"Can this be put to practical use?" "No, I don't think a thing like this will ever do." Masaru Ibuka and Kazuo Iwama were having a lively discussion about an article in an American magazine. The article reported on the invention of the transistor at Bell Laboratories in the United States. A short explanation was given along with a picture of a contact-point transistor. "By setting a couple of tungsten needles in a germanium crystal," the explanation began.

"It has no future," Ibuka concluded as he read through the article, remembering the crystal detector which he had initially used in his ham radio. The crystal detector would detect radio waves with a metal needle set in a galenic zinc crystal. The radio could be heard by connecting a receiver to this device. It resembled the transistor, but could hardly be called a sophisticated machine. The needle would be easily displaced if someone nearby sneezed or moved even slightly, and thus would have to be reset each time it was displaced. This required delicate and troublesome tuning. Based on his experience, Ibuka assumed that the transistor would have little use.

In March 1952, Ibuka decided to visit the United States for a three-month inspection tour. At that time, tape recorder sales in Japan were limited to the educational market, centering around schools. Ibuka keenly wanted to widen this market -- he hoped to see for himself how American consumers used tape recorders. And if possible, he wanted to observe how tape recorders were manufactured by American companies on their assembly lines.

As Ibuka boarded the Northwest DC-6 jetliner at Haneda Airport after a send-off by his family and colleagues, he felt a little bit nervous. This was his first trip abroad and he could not communicate well in English.

The Northwest passengers were asked to disembark in the middle of the night. Ibuka, who had assumed that the plane would fly to Anchorage nonstop, felt ill at ease and wondered, "Where am I?" Looking about and listening to the stopover announcement carefully, he learned that the plane had landed on Semichi, a western island in the Aleutian Islands. "But this stopover is not mentioned in the flight schedule," Ibuka thought uneasily to himself. Much to his relief, however, the plane was just refueling. Dinner was served, and the plane departed to reach Anchorage safely the next morning.

But Ibuka received a shock of a different kind in Anchorage as he experienced racial discrimination at immigration, where different races received different treatment. Witnessing this negative aspect of American society, he felt disturbed.

Ibuka then flew from Anchorage to Seattle, where he was to change planes to proceed to New York. In Seattle he learned that there would be no plane to New York for three or four days. Hotel and sightseeing expenses during this unexpected stay were borne by the airline company. Taking advantage of this opportunity, Ibuka decided to meet a friend who lived in Tacoma, a suburb of Seattle. He waited and waited, but this friend did not show up. "Well, he promised to be here and show me around. I wonder what happened..." He went back to his hotel room, still puzzled. Ibuka found out later about daylight savings time in the U.S. But it was too late, and Ibuka missed the chance altogether to see this friend.

Despite such unfortunate events Ibuka arrived in New York in one piece. "The United States is really fantastic. Buildings are brightly lit until late at night. The streets are jammed with automobiles. This is a stunning country!" Everything Ibuka saw and heard astonished him. Being an automobile enthusiast, Ibuka heaved a deep sigh as he gazed at an array of big American cars in the front of a used car showroom. But Ibuka found them to be too expensive. He had to be extremely careful with his money, even for taxis, and could spend only $10 to 20 a day due to strict Japanese government regulations that limited the amount of foreign currency taken out of Japan.

A Decision Made During a Sleepless Night

Shido Yamada (center)
in New York.

When Ibuka arrived in New York, he first visited the city branch of Nissho (now Nissho Iwai) to meet Shido Yamada. Tamon Maeda and Nissho president Masaichi Nishikawa had lived in New York before the Second World War and knew each other well. They had returned to Japan on the same ship after the war. It was through Nishikawa's introduction that Ibuka met Yamada.

Yamada had temporarily worked at Nissho in New York prior to working in the stock brokerage business both before and during the war. A man of high esteem, Yamada was not only proficient in English but also quite well informed on what was happening in the U.S. He proved to be an excellent contact, helping Ibuka throughout his stay in the United States by showing him around and acting as an interpreter. When Ibuka said, "Staying at a hotel would be a waste of money because my foreign currency allocation is limited," Yamada offered him lodging. When Ibuka wanted to see a factory, he arranged it.

One day, another friend in the U.S. came to see Ibuka and informed him that Western Electric was going to release their transistor patent to interested companies. "Are you interested?" the friend asked him.

The transistor was invented in 1948 by Dr. W. B. Shockley, Dr. J. Bardeen and Dr. W. Brattain, all of Bell Laboratories. Western Electric, the parent company of Bell Laboratories, held the patent rights for manufacturing the transistor and had just made the rights available to anyone who would pay royalties. That was what Ibuka was told.

Since his arrival, Ibuka had been having one sleepless night after another, despite his hectic and exhausting schedule. This was only natural, considering the fact that he was traveling in a foreign country for the first time. On such restless nights, Ibuka would think about his company and colleagues back home. n idea flashed through his mind. "We will work on the transistor. It will require many engineers and researchers as well. Thank God those new Totsuko people relish a new challenge. This is just right for them."

Totsuko had hired a large number of specialists in an effort to advance the company's tape production technology. Consequently, about one third of Totsuko's staff were graduates from colleges and universities, making Totsuko a top-heavy company. Ibuka was worried about this situation. As the tape recorder business had taken a definite shape, Ibuka had started thinking about some new project which would galvanize and best utilize the diverse strengths of his engineering and specialist talent. "What kind of work should I give them?" Ibuka kept asking himself.

An idea flashed through his mind. "We will work on the transistor. It will require many engineers and researchers as well. Thank God those new Totsuko people relish a new challenge. This is just right for them."

If Totsuko had not been facing such a situation, Ibuka probably would have paid no heed to Western Electric's offer. His original purpose in coming to the U.S. had nothing to do with the transistor. The royalty payment of $25,000 (about 9 million yen) then seemed too large for Totsuko. Yet the feeling that it would be worth try was beginning to dominate Ibuka's mind. Besides, four years had passed since the invention of the transistor, and Ibuka appreciated the fact that, despite his initial assumption, the transistor was very different from the crystal detector. The transistor itself had been much improved, moving from a contact-point type to an alloy type.

Ibuka asked Yamada for help at once. "I want to get as much information as possible on the transistor before I return to Japan." Yamada tried again and again to arrange a meeting with the Western Electric manager in charge of transistor devices, but had difficulty in doing so. The time for Ibuka to leave the U.S. soon came. After entrusting the matter to Yamada, he returned to Japan with some regret. Ibuka's souvenirs of the United States were a germanium diode and a vinyl tablecloth, neither of which existed in Japan at the time.

A Small Factory in Town Can't Do It!

As soon as he returned to Japan, Ibuka told Akio Morita of his decision and asked him about the possibility of producing the transistor at Totsuko. "It does seem worth trying," Morita agreed. They spoke to managing director Koichi Kasahara. "We are thinking of entering the transistor field. What would you say?" This was so sudden that Kasahara was speechless and asked to think about it overnight.

When consensus was reached in the company, Ibuka went to MITI (Ministry of International Trade and Industry) at once to obtain a license for manufacturing the transistor. MITI refused point-blank: " Transistors cannot be produced so easily." How could Totsuko's small factory produce such a complex thing as the transistor? With foreign currency so scarce, it would simply be out of the question to let Totsuko use dollars to pay the high royalty fee.

About that time, big companies like Toshiba Corporation, Mitsubishi Electric Corporation and Hitachi,Ltd had begun working on the transistor in Japan. They had signed a so-called umbrella contract with RCA in the U.S., which required royalty payments for producing any transistor-based produced in Japan in exchange for RCA's engineering know-how. MITI felt that if leading Japanese companies were working under such a contract, it would be quite reckless for Totsuko to purchase only Western Electric's patent rights.
Ibuka saw that tape recorders had not penetrated the American consumer market as much as in Japan. While tape recorders were beginning to permeate the home market in Japan, in the U.S. they were being used mainly by stenographers and news reporters. In fact, in no other country in the world had the tape recorder gained such high popularity in the educational field as in Japan. This was an outstanding achievement for Totsuko, which was based on its painstaking development of the school market. Tape recorders, which first appeared in schools as a teaching aid, had allowed people access to a variety of cultural, musical, and other activities. The social impact one can see today is immeasurable.

A Letter from the United States

Akio Morita on his trip to the
United States.

A Ibuka left New York, Yamada continued to help Totsuko acquire the transistor patent from Western Electric. He paid frequent visits to their office.

Each time, Yamada ardently described the kind of company Totsuko was.
Yamada had a talent for sketching and he often drew pictures of people working in the Western Electric office. So before long Yamada became very popular with the employees. He wrote Ibuka a detailed report on his talks with Western Electric.
Why would Yamada care so much about Totsuko, a company with which he had little personal connection?
As an experienced stockbroker in New York, Yamada sensed there was something special about Totsuko.
"Totsuko is small and unknown, but wait and see, Makie," he would often say to his wife. "I'm sure they'll become a major enterprise before too long."

Eventually Yamada's efforts bore fruit, and this was conveyed to Ibuka in a letter from the U.S. "We will be pleased to license our patent to your company," wrote Western Electric, urging Ibuka to send someone to sign an agreement.

Totsuko had developed the tape and tape recorder all by itself, with no technical support or advice from any company. Western Electric was impressed by this fact and decided that a company with such engineering expertise would make good use of their transistor patent.

In August 1953, Morita, who was to start out for a three-month tour of American and European businesses, was asked to sign an agreement with Western Electric. This was Morita's first trip abroad. "Why did Japan go to war against such a big country?" was his candid impression of the United States. The U.S. was so huge and entirely different from Japan in every sense of the word. Totally surprised by everything he saw, Morita was beginning to lose his self-confidence.

Yuzuru Tanigawa, Ibuka's old friend who had a long relationship with Totsuko, had been sent to the New York branch of the Yamashita & New Japan Steamship Company prior to Morita's arrival in the U.S. Tanigawa had heard a lot in Japan about the transistor from Ibuka. "This is going to be a major revolution. The transistor has all the functions of a vacuum tube. It is small, but has a semipermanent life. We must do it by all means." Ibuka's enthusiastic and passionate face was still vividly etched in Tanigawa's mind when Morita arrived in New York.

"Mr. Tanigawa, do you think Western Electric will see a Japanese like me from such a nondescript company as Totsuko?" Morita asked faintly, being in unusually low spirits. He was scheduled to visit the American company the next day to explain how Totsuko had developed the tape and tape recorder all by itself. But how could he negotiate with such a big company as Western Electric, so large in comparison with Totsuko? The sheer vastness of the U.S. having made him restless, Morita could not help but come and see Tanigawa at his hotel.

"I'm afraid they really won't take this seriously tomorrow, so I may give it up now," Morita confessed. "What are you saying? Americans aren't like that," said Tanigawa. "Whenever they find something interesting, they will just come out and tell you. This is where Americans differ from Japanese. Besides, Mr. Yamada will be with you. In any event, you have nothing to lose by trying," he added.

As he had done with Ibuka, Yamada accompanied Morita everywhere since his arrival in New York because Morita could not then speak English. With Tanigawa's encouragement and sense of security at having Yamada beside him, Morita made up his mind. "Well, if you say so, I may go. Yes, I will."

The Fruit of Morita's Trip

Akio Morita is successful in
signing a contract with
Western Electric.

Morita was out of breath when he returned to Tanigawa's hotel and said to his friend, who had been waiting eagerly to hear the result of the meeting, "Well, it went all right." The Western Electric response was positive, and Tanigawa had never seen such a delighted look on Morita's face before.

Totsuko had yet to obtain approval from MITI in Japan, so Morita hastened to sign a provisional agreement contingent upon MITI's approval. On this occasion, the Western Electric engineers said to Morita, "The transistor is a very fascinating thing. At this stage, however, it can only be used for audio purposes. You can make hearing aids or something like that. Yes, you should make hearing aids when you go back to Japan," they strongly recommended. Morita just answered, "Well, yes," though he did not see much potential for hearing aids, regardless of how he looked at the market.

The Totsuko-Western Electric agreement did not cover technology. So after signing the provisional agreement Morita went about gathering as much reference material as possible on the transistor, hoping that it would prove useful in Japan. Upon finishing his business in the U.S., Morita started out for his next destination -Europe.

Morita's first stop was Germany. Although like Japan, Germany had been defeated in the war, it boasted a great technological heritage. Morita was plagued by the same inferiority complex in Germany as he had felt in the U.S. "Will Totsuko ever be able to develop worldwide markets in competition with American and German companies?" he wondered. Morita, who had been so ambitious about one day launching Totsuko products worldwide, began to take a rather pessimistic view.

In low spirits, Morita took a train from Germany to Holland, the birthplace of Philips. In Holland Morita felt comfortable enough to relax. Holland was a small agricultural country where people were riding bicycles everywhere. "It somehow resembles Japan," Morita thought, feeling nostalgic. There was almost no industry in Holland at the time -it was a country still dependent on agriculture. One could find the word 'Holland' written on eggs sold all over Europe. Morita fully appreciated that Philips was headquartered in this small country and was exerting a worldwide sales influence from there.

After arriving in Europe, Morita realized how big Japan was. Of course, Japan was a small country compared with the U.S., but in Europe a jet plane could take you from one country to another in an hour or so, and a four-hour train ride in Holland could take you beyond its border.

Though located in the remote countryside, Philips exerted great influence on the world electronics industry. Until Dr. Philips started his business there, Eindhoven had been a rather small, rural town. Beginning with the manufacture of electric light bulbs, Dr. Philips created the Philips empire in a remote locality which had no industrial history. "What has been done by Dr. Philips can be done by us. We have a chance to rise too." Suddenly, deep courage began to fill Morita's heart.

Morita wrote to Ibuka from Holland saying, "I am deeply encouraged by the sight of Philips and am fully convinced that we too can sell our products all over the world."

Upon returning to Japan from his three-month trip, Morita reported to Ibuka immediately on his meeting with Western Electric. "Let's make something with the transistor. If we can produce transistors, that will give us a great opportunity. Western Electric strongly recommends that we make hearing aids. But what do you think?" Ibuka did not think hearing aids were a good idea either.